The impact of futures trading on volatility of the underlying asset in the Turkish stock market

Kasman A., KASMAN S.

PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, cilt.387, sa.12, ss.2837-2845, 2008 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 387 Sayı: 12
  • Basım Tarihi: 2008
  • Doi Numarası: 10.1016/j.physa.2008.01.084
  • Dergi Adı: PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus
  • Sayfa Sayıları: ss.2837-2845
  • Anahtar Kelimeler: futures market, volatility, Turkish derivative exchange, EGARCH, CONDITIONAL HETEROSKEDASTICITY, PRICE VOLATILITY, TIME-SERIES, UNIT-ROOT, CASH, COINTEGRATION, INFORMATION, HYPOTHESIS, NEWS
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

This paper examines the impact of the introduction of stock index futures on the volatility of the Istanbul Stock Exchange (ISE), using asymmetric GARCH model, for the period July 2002-October 2007. The results from EGARCH model indicate that the introduction of futures trading reduced the conditional volatility of ISE-30 index. Results further indicate that there is a long-run relationship between spot and future prices. The results also suggest that the direction of both long- and short-run causality is from spot prices to future prices. These findings are consistent with those theories stating that futures markets enhance the efficiency of the corresponding spot markets. (C) 2008 Elsevier B.V. All rights reserved.